Global markets were mixed overnight, with the US market moving higher as Financials lagged.
The big news this morning was the US Federal Reserve raised interest rates by a quarter of a percentage point to the 1.25%-1.5% range, as anticipated, and left its rate outlook for the coming years unchanged even as policymakers projected a short-term acceleration in US economic growth. Unchanged from September, the Fed projects three more hikes in each of 2018 and 2019 before a long-run level of 2.8% is reached.
Prior to the Fed announcement, the US dollar halted four days of gains after data showed US consumer inflation picked up in November, though the so-called core gauge – which excludes food and energy costs – unexpectedly slowed. Persistent low inflation has been the key area of concern for the Fed, and potentially challenges the Fed's rate hike path. We are watching inflation closely.
Stock in Focus: EBOS Group (EBO:NZ / EBO:AX)
Yesterday, incoming chief executive of pharmacy and animal healthcare company EBOS said the group is "actively looking" for more acquisitions in both of its main divisions and predicts further consolidation in the pharmacy sector as size becomes more important. We see this as “no change” to the Ebos approach.
While the company has also been driving organic growth, it has been eyeing acquisitions large and small that could be bolted on to the pharmacy and animal healthcare divisions. EBOS acquired on-site hospital pharmacy company HPS for $154 million in May and in October bought a 14% stake in ASX-listed MedAdvisor, a digital medication management company. New CEO John Cullity said he expects more mergers and acquisitions in the pharmacy sector and wants EBOS to be a player in it.
We hold a positive view on Healthcare stocks such as Ebos given the ageing population investment theme. We believe Ebos has the ability to make sensible acquisitions given their proven track record to add value with a well-diversified business portfolio and ability to execute further growth opportunities that will continue to add value for shareholders over the medium term.
We currently have a BUY rating on EBO.
Australia & New Zealand Market Movers
The Australian share market was in positive territory on Wednesday (ASX 200 index +0.14%) with Westfield soaring after news of a massive takeover offer for the property giant. The Australian dollar traded off recent lows at US75.72c after consumer sentiment jumped to its highest in four years in December. Westfield shares shot up 13.7%to end the day at $9.66 after news of what is expected to be one of the biggest takeovers of an Australian company on record.
The New Zealand market edged to a new record yesterday (NZX 50 index +0.04%) by stock market operator NZX and as investors changed their tune on a2 Milk Co late in the day. Air New Zealand fell on disappointing monthly metrics. Heartland Bank slipped after it resumed trading. The bank raised $59 million through a rights issue selling shares at $1.70 apiece, and yesterday's shortfall bookbuild set a price of $2.02. Outside the benchmark index, Hallenstein Glasson Holdings climbed 5.5% after saying first-half profit could rise by as much as 50%, depending on Christmas trading.
3 Things Markets Will be Watching this Week
1. The US Federal Reserve makes an interest rate decision on Thursday morning AU/NZ time.
2. The European Central Bank also makes a post meeting announcement on Friday.
3. Australian employment figures are released Thursday.
Have a Great Day,
Team
